Integrated Synthesis of Media, Society and Behavior

The Video Advertising Myth

Yeah, it’s all the rage in agency/vc/online publisher land but Online Video and Online Video ads is not going to get very many people rich really quickly, not like search ads and domain squatting.

Yes, youtube and other video outlets are growing like weeds still but their revenue is not even close to their costs. Their infrastructure providers aren’t even making a profit. Users are consuming content but not ads and advertisers aren’t buying.

Really.

There are some very specific reasons why:

The cost of serving videos is anywhere from $1-5 cost per thousand. That’s 10-50x higher than text and text ads (the major of online business)

The consumption of video is very low relative to other content like emails, ims, stories, blogs, comments, news and photos

Viral activity is limited – You can’t email full videos to each other and certainly not wrapped in ads like emails and stand alone webpages

The cost in time, money and creativity to make watchable video and video ads is 10-100x greater than text copy and text ad copy

The targeting mechanisms suck to the point that they are worse than no targeting at all

over 95% of video isn’t monetizable easily (pump and dump like text ads). Most consumption is in bad home movies, porn, music videos and highlights from TV.

The video experience is catastrophically altered by video ad pre rolls and other intrusive ads. We all can easily ignore banners that surround text, we can’t ignore pre rolls that keep us from the content. We could all get over that as consumers if the content were good quality/engaging and exclusive a site, but its not and won’t ever be

Media Entropy – there’s no possible way for us to aggregate video and a/v experiences like we did when only the boobtube pumped out content on 3 channels. Consumers are everywhere and no where – at least 10 major aggregator video sites, 10,000 legit video publishers, embeds on every blog, cell phones, slingboxes, set tops, video game console on demand, TV, and LCD screen everywhere we go

Video Ad Rates have NO CORRELATION to transactional nor brand value, not even audience size gets you much. The rates are all over place and are overly high, only because the costs are high. Rates will drop faster than costs making online video damn near impossible to do at high margins. (I know this FIRST HAND and would love show data… but that data will become apparent as the market matures)

Hollywood types have been asked to the party. Yup, the first Internet explosion was built by a totally new crop of thinkers. it was devoid of most of the hollywood gimmick and a lot of traditional agencies and publishers didn’t participate. Now the stakes are so high that everyone is involved and the level of raw creativity has gone down a lot – Or the raw creativity is being washed out by all the white noise from everyone who ever had a thought, good or bad. Barrier to entry is so low with all these great toolsets, cheap hosting and complete anarchy in copyright law.

Personally, I love this. the complete destruction of all rules. the annihilation of former schedules. It’s not going to get less complicated.

Certainly tons more to say on this and tons more to talk about when i say search ads are still where the money’s at……..